Banking Web sites pose potential compliance risk

Filed under: Banking & Finance |

Bank and insurance company Web sites could be getting their organizations some unwanted attention.

Financial services consultant Les Abromovitz told bankers at a conference last month that while Web sites increase a bank’s visibility to potential clients, they also attract the attention of regulators.

And, if the sites aren’t updated frequently, it’s a red flag for compliance experts.

Abromovitz told bankers that regulations outlined in Rule 206(4)-1 of the Securities and Exchange Commission guidelines prohibits the use of testimonials and provides site advertising guidelines.

Abromovitz said financial services companies should carefully consider the biographies and credentials of executives that are posted to their Web sites and should make sure that all information on the site is up to date and consistent with what is reported to regulators.

Companies also should save all versions of their Web sites for at least five years, he said.

Bernanke: boomers a burden

The retirement of 78 million baby boomers will devastate the nation’s economy unless Social Security and Medicare are revamped, according to Federal Reserve Chairman Ben Bernanke.

As the population ages, he warned that Americans will have to choose among higher taxes, fewer dollars for other programs, lower spending on entitlement programs, a sharply higher budget deficit or a combination of all four.

Government spending for Social Security and Medicare will increase from about 7 percent of the U.S. economy to almost 13 percent by 2030, and to more than 15 percent by 2050, he said.

The fiscal consequences of these trends are unavoidable, Bernanke said.

For instance, if the government tried to finance projected entitlement spending entirely by revenue increases, the taxes collected would have to increase from about 18 percent of the total size of the economy to about 24 percent in 2030, he said.

If the government attempted a fix through spending cuts, spending for programs other than Social Security and Medicare would need to fall sharply, something Bernanke compared to the equivalent of a budget cut of about $700 billion.

Weill cooking up a book

Just how did former Citigroup chairman Sandy Weill build the biggest bank in America?

You can read all about it — acquisition by acquisition — in his new book.

Weill, who stepped down from his position in April, has written “The Real Deal: My Life in Business and Philanthropy.”

The 73-year-old said he wrote the book to share some of what he learned through five decades in the investment and banking businesses.

J.P. Morgan moves to 2nd

J.P. Morgan Chase ranks second on the list of the largest hedge fund managers in the United States, according to a survey by Absolute Return magazine.

Last year J.P. Morgan Chase ranked 12th in the same survey.

The New York-based investment bank has $28.8 billion in assets under hedge fund management. That’s an 80 percent increase from the $16 billion under management last year.

The jump comes after aggressive action by J.P. Morgan Chase to up its hedge fund activity. In 2004, the firm purchased Highbridge Capital Management, which at the time had $7 billion under management. It is now estimated to manage about $12 billion.

The firm has also built a group of 38 in-house hedge funds with about $16.6 billion under management, which is twice the amount recorded last year.

Fed issues mortgage guide

Last week, the federal financial regulatory agencies issued guidance about nontraditional mortgages, such as interest-only and adjustable-rate mortgages that allow borrowers to exchange lower payments during an initial period for higher payments later.

Even though the mortgage options have been available for years, the number of institutions offering them has spiked during recent years, making them available to a wider spectrum of borrowers, the agencies warn.

The mortgages are targeted for those who likely would not qualify for similar-sized traditional mortgages.

The guide directs managers to ensure that loan terms are consistent and that consumers have sufficient information prior to borrowing.

First State expanding

First State Bancorp, parent company of First Community Bank, took a big step this week when it purchased Front Range Capital Corp. for $72 million in cash.

First Community Bank operates two branches in Colorado Springs, including a 10,058-square-foot branch at 5225 N. Academy Blvd. that opened July 17.

The deal will add 20 branches to First State Bancorp’s already 62 branches in four states.

The transaction is subject to regulatory approval and is expected to be completed in the first quarter of 2007.

First State Bancorporation first entered the Colorado market when it acquired First Community Industrial Bank in October 2002.

First Community focuses on the locally owned business market. Front Range Capital has also worked to capture the same market.

Rob Larimer covers banking and finance for the Colorado Springs Business Journal.